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What Is a Mobile Wallet and How Does It Work?





You just spent $575.50, and you didn’t even feel it, did you? 

How the heck did that happen? Nope, it wasn’t spent using a credit card (although, yeah, those things suck too). This money was spent with the super easy swipe, tap, scan and ding of your mobile wallet. 

What Is a Mobile Wallet?

A mobile wallet is a virtual way of storing payment information like your bank account or debit card number. After you link the mobile wallet app to your bank account, the app uses that account each time you make a purchase through the app. You can pretty much set it and forget it. Most of the time, it’s as easy as just scanning your finger (or even your face!). One little move and that item is yours.

Mobile wallets are becoming a more and more popular payment method every year. In fact, 32% of all mobile wallet users said they use three or more mobile wallet apps, and some have as many as nine (those zoomers and millennials gotta have ‘em all)!1

Examples of Mobile Wallets and Cashless Payments

Just in case you’re wondering, we’re not talking about buying something online with your debit card here. A mobile wallet (aka cashless payment) is much different than that. Here are some of the most popular and widely used mobile wallets—from A to Z:

  • Apple Pay
  • Cash App
  • Google Pay
  • PayPal
  • Samsung Pay
  • Venmo
  • Zelle

And it’s not just big tech companies that are getting in on the digital wallet game. Retailers like Amazon and Walmart have also set up their own digital wallet services.

Where Can I Use a Mobile Wallet Service?

Almost anywhere. The question here is more like: Where can I not use a mobile wallet? Seriously.

With all the payment options out there, you can actually leave the house without your debit card or cash and not worry about being able to buy what you need—because you’ve got your mobile wallet. Most stores accept some kind of cashless payment, and they usually post the logos of the different options they take. If they don’t have a sign posted, just ask.

Some businesses have even made the leap and are accepting only cashless payment. For example, Cedar Fair, which operates 26 amusement and water parks across the U.S. and Canada, recently announced that all its parks will become cashless.2 So don’t even think about handing the green stuff over for those soft pretzel bites at Valleyfair!

But this doesn’t mean that the world is going completely cashless. Most businesses are still accepting cold hard cash . . . and why wouldn’t they? Cash is still king!

Are Mobile Wallets Secure?

The short answer? Yes. Mobile wallets can be even more secure than using a regular debit card out in the wild. The information is encrypted to keep it safe. Plus, you can’t lose a mobile wallet like a physical debit card, and identity thieves can’t drain your bank account in two seconds flat without your knowledge.

Still, these days, it’s easy to feel like we’re all just one click away from being hacked and having our data stolen. If you do plan to use some type of cashless payment on your phone, be sure to take steps to keep your mobile phone secure.

Even simple things like installing security updates, staying off public Wi-Fi, and using two-factor authentication can make a difference. And use your fingerprint or facial recognition to sign into your mobile wallet app if it gives you the option.

Do Mobile Wallets Encourage Overspending?

They can. Mobile wallets are out-of-this-world convenient, but they can make overspending a little too convenient if you aren’t careful. 

Let’s make this clear first: Using a cashless payment does not automatically mean you’re going to overspend. Who’s in control of your spending habits anyway? You are! So that means you’re in charge of making sure you budget and don’t go overboard.


Start budgeting with EveryDollar today!

But like we said before, mobile wallets make it ridiculously easy to spend more money than you mean to. That’s because it’s convenient as heck.

Think about it: When you actually hand over a $20 bill to the cashier, you feel it leaving your fingers. You feel in your gut that you just spent money, and it actually activates the pain centers of the brain.3

There’s also an exchange. You give the cashier your $20 bill and they hand you the item you bought. With mobile pay, there’s no physical exchange. Swiping or tapping to spend money doesn’t hit you the same way it does when you actually hand over cash. You feel like you’re getting something for nothing. That’s why it’s so easy to spend hundreds of dollars with a mobile wallet. You never feel the pain of spending that money. It’s like magic! Spoiler alert: That’s bad.

It’s a pretty genius move on the part of the businesses, really. The easier they make it for you to buy something, the more likely you are to spend. And the more you spend with them, the more money the businesses make. See what we mean? It’s a slick trick all right. But you don’t have to fall into that trap. 

Should I Use a Mobile Wallet?

Here’s the thing: Mobile wallets aren’t evil. They’re tools. And like any other tool, they can be used for either good or evil. It’s the way you go about using the tool and spending the money that can get you into a mess real quick.

You just have to keep reminding yourself that using a cashless payment isn’t magic. It’s pulling money from your bank account with every single swipe, tap and scan. You’re not spending fake Monopoly money here. It’s your real, hard-earned cashHeck, even handing over money in Monopoly hurts more than using a mobile wallet does. At least you feel the money going back to the fake bank.

Remember, the easier it is to spend money, the easier it is to get into trouble—fast.

Stick to Your Budget—Even When Using a Mobile Wallet

If you do use a mobile wallet, just be sure to track the purchases in your budget (like you do with everything else). Our free budgeting tool, EveryDollar, makes this a cinch.

Once you’ve spent the amount you budgeted for the month, that’s it. Don’t be tempted to spend more using your mobile wallet. Just treat it like anything else you budget for and it’ll be way easier to not overspend.

You’ve got this!

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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